New HMRC rules begin today affecting petrol, diesel and electric car owners

New HMRC rules launching today could have a major impact on petrol, diesel and electric car owners. From today, Sunday, December 1, pence per mile rates for company cars will be changing as part of the final Advisory Fuel Rate (AFR) update for 2024.

These rates only apply to employees using a company car. HMRC urges business owners to use the rates when you either reimburse employees for business travel in their company cars OR need employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances. If the mileage rate you pay is no higher than the advisory fuel rates for the engine size and fuel type of the company car, there will be no taxable profit and no Class 1A National Insurance to pay.

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If your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates, you can use your own rates to reflect your situation. If you pay rates that are higher than the advisory rates but cannot show that the fuel cost per mile is higher, there will be no fuel benefit charge if the mileage payments are only for business travel. Instead, you’ll have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.

There will be no fuel benefit charge if you correctly record all private travel mileage and use the correct rate (or higher), to work out how much your employees must repay you for fuel used for private travel. You will not need to use the advisory rates where you can show that employees cover the full cost of private fuel by repaying at a lower mileage rate.

Advisory fuel rates from December 1, 2024

Petrol

Engines up to 1,400cc - Reduced to 12p

Between 1,401cc and 2,000cc - Reduced to 14p

Over 2,000cc - Reduced to 23p

Diesel

Engines up to 1,600cc - Reduced to 11p

Between 1,601cc and 2,000cc - Reduced to 13p

Over 2,000cc - Reduced to 17p

Liquefied Petroleum Gas (LPG)

Engines up to 1,400cc - Remains at 11p

Between 1,401cc and 2,000cc - Remains at 13p

Over 2,000cc - Remains at 21p

Electric

All electric vehicles - Remains at 7p